What Is a Non-profit Corporation?

Generally, non-profit corporations are organized and structured like regular corporations. The primary difference between non-profit corporations and regular corporations is that non-profits exist to fulfill a non-monetary purpose, whereas regular corporations exist only to make money. Non-profits also stand out because they have tax-exempt status and are eligible for governmental and private funding.

What Groups Can Become Non-profit Corporations?

Qualifying as a non-profit depends on the activities the corporation will perform. Generally, a non-profit corporation's purpose must be one of the following:

Charitable

Educational

Literary

Religious

Scientific

Often, artists, community service groups, musicians, and religious-based organizations qualify as non-profit corporations.

Non-Profits Are Tax Exempt

A non-profit is not required to pay any federal or state income taxes for activities related to its stated purpose. Additionally, private parties who donate or make contributions to a non-profit corporation receive a tax deduction.

Are There Any Limitations on the Activities of a Non-profit?

In order for a non-profit corporation to maintain its tax-exempt status, it must not engage in any of the following activities:

Contribute money to political campaigns

Engage in lobbying that would influence legislation to a "substantial degree"

Distribute profits to officers, directors or members

Make a "substantial" income from activities unrelated to its purpose

Furthermore, if the non-profit dissolves, it must distribute its money and assets to another qualified non-profit corporation.

Non-Profit Directors and Officers

A non-profit has directors (sometimes called "trustees") and officers that make management and policy decisions, just like a regular corporation. Generally, the officers and directors are shielded from the liabilities (such as debt and lawsuits) of the corporation. Although non-profits do not have shareholders (owners), a non-profit may have members with voting rights.

Should I Consult an Attorney with My Non-profit Corporation Issue?

Corporation laws vary depending on the state of incorporation. An attorney will help you determine what you need to do according to your state law. Timelines and deadlines for non-profit incorporation are extremely strict in many states. A lawyer can assist you with following all the detailed procedural rules, contacting all the necessary state and federal officials, and adhering to the deadlines for incorporating a non-profit corporation. Also, an attorney can give you advice as to the tax laws that will apply to your non-profit, and will help you follow the procedural rules of your state should you desire to dissolve.